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Performance management

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Performance management

  1. 1. 18 September 2010<br />Ateneo de Manila University <br />Graduate School of Business<br />MBAH Batch 8<br />PERFORMANCE MANAGEMENT<br />andal<br />aranzamendez<br />untalan<br />villarin<br />
  2. 2. Don RebsAndalRicky AranzamendezTong UntalanDing Villarin<br />
  3. 3. OBJECTIVES<br />Identify major determinants of individual performance<br />Discuss the three general purposes of performance management<br />Identify the five criteria for effective performance management system<br />Discuss the four approaches to performance management, specific techniques used in each approach, & the way these approaches compare with criteria for effective performance management system<br />
  4. 4. OBJECTIVES<br />Choose the most effective approach to performance measurement for a given situation<br />Discuss the advantages & disadvantages of the different sources of performance information<br />Choose the most effective source/s for performance information for any situation<br />Distinguish types of errors & explain how to minimize each in a performance evaluation<br />Identify the cause of a performance problem<br />
  5. 5. What is Performance <br />Management?<br />Means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals. <br />
  6. 6. Parts of Performance Management System<br />1. Job Analysis ( Define ) - specifies which aspect of performance are relevant to the organization 2. Performance Appraisal ( Measure ) - measures aspect of performance, how well an employee is doing his job<br />
  7. 7. Parts of Performance Management System<br />3. Performance Feedback - provides feedback to<br /> employee, tying rewards to<br /> performance through<br /> compensation system - employees effectiveness <br />
  8. 8. Major Determinants of Individual Performance <br />Organizational Strategy<br />Long and short term goals and values <br />Individual Attributes <br />(e.g. Skills and abilities )<br />Objective Results <br />Individual Behaviors <br />Situational Constraints<br />Organizational culture <br />Economic conditions<br />
  9. 9. Purposes of Performance Management<br />1. Strategic Purpose - link employee activities with organization’s goals the results, behavior, employee characteristics developing measurement and feedback mechanism 2. Administrative Purpose - administrative decisions: salary administration, promotions, retentions, layoffs, and recognition <br />
  10. 10. Purposes of Performance Management<br />3. Developmental Purpose - develop employees who are<br /> effective - identifies deficient aspects of<br /> employees’ performance and<br /> its causes<br />
  11. 11. Five Criteria for Effective Performance Management <br />1. Strategic Congruence - extent to which the performance management system elicits job performance that is consistent with the organization’s strategy, goals and culture - guide employees in contributing to the organization’s success 2. Validity - assesses all the relevant and only the relevant aspects of job performance <br />
  12. 12. Five Criteria for Effective Performance Management <br />“ Content Validity”<br />Job <br />performance <br />measure<br />Actual, or “true” <br />job performance<br />Contamination<br />Deficiency<br />Validity<br />
  13. 13. Five Criteria for Effective Performance Management<br />3. Reliability - consistency of a performance measure, free from random error - interrater reliability - internal consistency reliability - test - retest reliability: reliable over time<br />
  14. 14. Five Criteria for Effective Performance Management <br />4. Acceptability - satisfactory or adequate by those<br /> who use it - 3 categories of perceived fairness: > procedural > interpersonal > outcome fairness<br />5. Specificity - detailed guidance to employees<br /> about what is expected and how<br /> they can meet these expectation <br />
  15. 15. Approaches to Measuring Performance<br />RebsAndal, MD<br />15<br />
  16. 16. Approaches to Measuring Performance<br />16<br />
  17. 17. Approaches to Measuring performance<br />We can manage performance by focusing on:<br />Employee attributes<br />Behaviors<br />Results<br />Addition:<br />Overall comparisons among individuals’ performance<br />Emphasis on Quality<br />
  18. 18. Learning Objective:Approaches to Measuring performance<br />Explore various approaches to measuring and managing performance<br />Discuss techniques associated with each approach<br />Evaluate the approached based on criteria<br />Strategic congruence, validity, reliability, acceptability and specificity<br />
  19. 19. 1. COMPARATIVE Approach<br />Requires the rater to COMPARE an individual’s performance with that of others<br />Uses overall assessment of an individual’s performance<br />Develop some RANKING of the individuals within the group<br />
  20. 20. 1. COMPARATIVE Approach<br />Three Techniques<br />Ranking<br />Forced distribution<br />Paired comparison<br />
  21. 21. 1. COMPARATIVE ApproachRANKING<br />Simple ranking<br />Rank employees within their department from hishest to poorest performer<br />BEST TO WORST<br />Alternation Ranking<br />List of employees, cross the best and worst employee<br />
  22. 22. 1. COMPARATIVE ApproachRANKING<br />Caution!<br />Received attention in the courts<br />Validation of the selection system using employee rankings as the measure of performance<br />Criteria of job performance may vary from one supervisor to another<br />A focused and stable body of criteria is warranted<br />
  23. 23. 1. COMPARATIVE ApproachFORCED DISTRIBUTION<br />Also uses ranking format<br />Employees ranked in groups<br />Employees put in predetermined categories<br />Best workers, in between, worst workers<br />Bottom 10%<br />No bonuses and can be terminated<br />
  24. 24. 1. COMPARATIVE ApproachFORCED DISTRIBUTION<br />Forces manager to categorize employees<br />Based on distribution rules not on performance<br />Advantage<br />Identifies high potential employees<br />Identifies poorest performers<br />Provides mechanism to help align company performance and employee performance and compensation<br />
  25. 25. 1. COMPARATIVE ApproachFORCED DISTRIBUTION<br />See table 8.4 page 357<br />
  26. 26. 1. COMPARATIVE ApproachFORCED DISTRIBUTION<br />Disadvantages<br />This practice is arbitrary<br />May be Illegal<br />Cause poor morale<br />Ex. 20 – 70 – 10 distribution<br />Prone to discrimination<br />Age, minority, women<br />Subjective<br />Potential negative side effects on morale, teamwork, recruiting, and shareholder perceptions<br />
  27. 27. 1. COMPARATIVE ApproachPAIRED COMPARISON<br />Compare every employee with every other employee<br />1 point for every higher performance<br />Total score obtained<br />TIME CONSUMING<br />
  28. 28. 1. COMPARATIVE ApproachEVALUATION<br />Effective in differentiating employee performance<br />Easy to develop and easy to use<br />Common failure to be linked to the strategic goal of the organization<br />Subjective – dependent on raters<br />Lack specificity for feedback<br />How can the individual improve his ranking<br />
  29. 29. 2. ATTRIBUTE Approach<br />Focuses on extent to which individuals have certain attributes<br />Characteristic or trait<br />Define a set of traits for evaluation<br />Initiative, leadership, and competitiveness<br />
  30. 30. 2. ATTRIBUTE ApproachGraphic Rating Scales<br />List of traits evaluated by a five point rating scale <br />See table 8.5 p 360<br />
  31. 31. 2. ATTRIBUTE ApproachGraphic Rating Scales<br />List of traits evaluated by a five point rating scale <br />Legal defensibility:<br />Subjective<br />Criticized appraisals – should demonstrate that rating is objectively related to actual work behavior<br />
  32. 32. 2. ATTRIBUTE ApproachMixed Standard Scales<br />improved version<br />Relevant performance dimensions<br />Statements representing good, average and poor performance<br />See table 8.6 p360<br />
  33. 33. 2. ATTRIBUTE ApproachMixed Standard Scales<br />improved version<br />Relevant performance dimensions<br />Statements representing good, average and poor performance<br />Originally developed as trait-oriented scales<br />Instrument using behavioral statements as a means of reducing rating errors in performance appraisal<br />
  34. 34. 2. ATTRIBUTE ApproachEVALUATION<br />Most popular method in organizations<br />Easy to develop and generalizable<br />Across any organization and strategy<br />Little congruence between techniques and the company’s strategy<br />Vague performance standards<br />Open to different interpretation<br />
  35. 35. 2. ATTRIBUTE ApproachEVALUATION<br />Vague performance standards<br />Different raters may provide extremely different ratings and rankings<br />Validity and reliability are low<br />These technique does not provide any specific guidance on how an employee can support the company’s goal or correct performance deficiencies<br />
  36. 36. 3. BEHAVIORAL Approach<br />Attempts to define the behaviors an employee must exhibit to be effective in the job<br />Behaviors are defined and managers assess the extent to which employees exhibit them<br />
  37. 37. 3. BEHAVIORAL ApproachCritical Incidents<br />Requires managers to keep record of specific examples of effective and ineffective performance<br />Provides specific feedback to employees - what they do well and what they do poorly<br />Can be tied to the company’s strategy<br />Individual approach – not being compared to others<br />
  38. 38. 3. BEHAVIORAL ApproachBehaviorally Anchored Rating Scale (BARS)<br />Builds on the critical incidents approach<br />Please check figure 8.4 p.63<br />
  39. 39. 3. BEHAVIORAL ApproachBehaviorally Anchored Rating Scale (BARS)<br />Builds on the critical incidents approach<br />Identify critical incidents that represent effective and ineffective performance<br />Experts agree on behavioral anchors that will serve as guide to raters<br />Anchors will serve as guide to managers<br />Rating becomes the employee’s score<br />Bias on information recall<br />
  40. 40. 3. BEHAVIORAL ApproachBehavioral Observation Scale (BOS)<br />Variation of a BARS<br />Developed from critical incidents<br />Uses many behaviors to necessary for effective performance<br />Requires managers to rate the frequency with which the employee has exhibited each behavior during the rating period<br />Ratings are then averaged to compute an overall performance rating<br />
  41. 41. 3. BEHAVIORAL ApproachBehavioral Observation Scale (BOS)<br />Drawback<br />May require more information that most managers can process or remember<br />A BOS can have 80 or more behaviors<br />Evaluation can be annual/ bi annual<br />
  42. 42. 3. BEHAVIORAL ApproachBehavioral Observation Scale (BOS)<br />Compared to BARS and graphic rating scales<br />BOS is preferred for differentiating good from poor performers<br />Maintains objectivity, providing feedback, suggesting training needs and being easy to use<br />
  43. 43. 3. BEHAVIORAL ApproachOrganizational Behavioral Modification (OBM)<br />Entails managing the behavior of employees through a formal system of behavioral feedback and reinforcement<br />Components<br />1. Define a set of key behaviors necessary for job performance<br />2. Use of measurement system to assess whether these behaviors are exhibited<br />3. Manager informs employees of these behaviors<br />4. Feedback and reinforcement<br />Figure 8.5 p 366<br />
  44. 44. 3. BEHAVIORAL ApproachAssessment Centers<br />Individuals usually perform a number of simulated tasks<br />Leaderless group discussions<br />In-basket management<br />Role playing<br />Assessors observe the individual’s behavior and evaluate their skill or potential as managers<br />
  45. 45. 3. BEHAVIORAL ApproachAssessment Centers<br />Advantage<br />Provide objective measure of an individual’s performance at managerial task.<br />Allow specific performance feedback<br />Individualized developmental plan can be planned/designed<br />Ex: Assessment center for certifications – middle manager certificate after OJT and developmental experiences <br />
  46. 46. 3. BEHAVIORAL ApproachEvaluation<br />Strengths<br />Can be very effective<br />Can link the company’s strategy to the specific behavior necessary for implementing strategy<br />Provides specific guidance and feedback<br />Behaviors identified are valid<br />Acceptability is high<br />Techniques are reasonably reliable<br />
  47. 47. 3. BEHAVIORAL ApproachEvaluation<br />Weaknesses<br />Behaviors and measures must be constantly monitored and revised<br />Ensure linkage with strategic focus<br />Assumption of “one best way” to do the job<br />Suited for less complex jobs<br />Least suited for complex job<br />Requires multiple ways and behaviors<br />
  48. 48. 4. RESULTS Approach<br />Focuses on managing the objective, measurable results of a job or work group<br />Results are the closest indicator of one’s contribution to organizational effectiveness<br />Management by objectives<br />Productivity Measurement and Evaluation System<br />
  49. 49. 4. RESULTS ApproachManagement by Objectives<br />Popular in both private and public organizations<br />Top management team first defines the company’s strategic goals<br />Goals are passed on to the next layer of management<br />Goal setting process cascades down<br />These goals are used as the standards by which an individual’s performance is evaluated<br />
  50. 50. 4. RESULTS ApproachManagement by Objectives<br />Components of the Goal<br />Specific<br />Difficult<br />Objective<br />Table 8.8 p 367<br />
  51. 51. 4. RESULTS ApproachManagement by Objectives<br />Effectiveness<br />Usually increases productivity<br />Productivity gains tend to be highest when top management is committed<br />Effectively links individual’s performance with firm’s strategy<br />Firm – Department – Individual - Rewards<br />
  52. 52. 4. RESULTS ApproachProductivity Measurement and Evaluation System (ProMES)<br />Goal<br />Motivate employees to higher levels of productivity<br />Measure and feedback productivity information to personnel<br />
  53. 53. 4. RESULTS ApproachProductivity Measurement and Evaluation System (ProMES)<br />STEPS<br />Identify what (product) the organization expects to accomplish<br />Staff defines indicators of the product<br />Staff establishes the contingencies between the amount of indicators and the level of evaluation associated with that amount<br />Feedback<br />
  54. 54. 4. RESULTS ApproachEVALUATION<br />Advantages<br />Minimizes subjectivity<br />Relies on Objective, quantifiable Indicators of performance<br />Highly acceptable <br />Managers and employees<br />Links individual’s results with the organization’s strategies and goals<br />
  55. 55. 4. RESULTS ApproachEVALUATION<br />Weaknesses<br />Contaminated<br />Affected by things beyond the employee’s control (ex. economic recession)<br />Deficient<br />Not all aspects of the job are amenable to objective measurement<br />May focus only on aspects of their performance that are measurable<br />Feedback lacks behavioral aspect<br />
  56. 56. 5. QUALITY Approach<br />Fundamental characteristics <br />Customer orientation<br />Prevention approach to errors<br />Goal<br />Improving customer satisfaction<br />
  57. 57. 5. QUALITY Approach<br />Expectations<br />Emphasize an assessment of both person and system<br />Emphasize that managers and employees work together to solve performance problems<br />Involve both internal and external customers in setting standards and measuring performance<br />Use multiple sources to evaluate person and system factors<br />
  58. 58. 5. QUALITY Approach<br />Techniques<br />Process flow analysis<br />Identify cause of delay/redundancy in the process<br />Cause and Effect diagram<br />Identify cause/event that result in undesirable outcomes<br />Pareto Chart<br />Highlight most important cause of a problem<br />Control Charts<br />Collecting data at multiple points in time<br />Histogram<br />Scattergrams<br />
  59. 59. 5. QUALITY ApproachEVALUATION<br />Relies primarily on combination of attributes and results approaches<br />Adopts a system-oriented focus rather than individual employee performance<br />Weakness<br />Many companies are unwilling to abandon their traditional performance management<br />
  60. 60. Performance Information<br />
  61. 61. V.Most effective approach to Performance management for a given situation<br />VI.Advantages & Disadvantages of the different sources of performance information<br />VII.Most effective source/s for performance information in any situation<br />
  62. 62. VII.Most effective source/s for performance information in any situation<br />1. Managers<br />2. Peers<br />3. Subordinates<br />4. Self<br />5. Customers<br />
  63. 63. Sources of Performance Information1. Managers<br /><ul><li>Most frequently used
  64. 64. Have the ability to rate employees
  65. 65. Feedback from MANAGERS is strongly related to performance</li></li></ul><li>Sources of Performance Information1. Managers<br /><ul><li>PROBLEMS:
  66. 66. Some managers can’t observe employees –
  67. 67. “work with..”
  68. 68. Supervisor bias (favoritism)
  69. 69. should not entirely rely from MANAGERS</li></li></ul><li>Sources of Performance Information2. Peers<br />Co-workers<br />Expert knowledege of job requirement<br />Observe employee daily!<br />Bring a different perspective in the evaluation process - provide extremely valid assessment of performance<br />Useful esp if supervisor does not always observe employee (eg.law enforcement)<br />
  70. 70. Sources of Performance Information2. Peers<br />PROBLEMS:<br />Bias due to friendship – although no empirical basis<br />Being both a rater & a ratee is uncomfortable esp if administrative decisions are evaluated<br />
  71. 71. Sources of Performance Information3. Subordinates<br />Evaluation of managers<br />UPWARD FEEDBACK<br />
  72. 72. Sources of Performance Information3. Subordinates<br />PROBLEMS:<br />Manager evaluation give power to subordinates<br />
  73. 73. Sources of Performance Information4. Self<br />Not often used<br />Observe own behavior – employees are given responsibility to contribute to corporate decisions<br />Useful if used as a prelude to a performance feedback session<br />
  74. 74. Sources of Performance Information4. Self<br />PROBLEMS<br />Tendency toward self inflated assessments (espfor administrative decisions – eg. Pay raises)<br />Employees attribute poor performance to co-workers<br />
  75. 75. Sources of Performance Information5. Customers<br />Often the only best person to observe employee performance<br />BEST source of information<br />Customer evaluation sheet<br />Random mail surveys<br />Telephone survey<br />USEFUL<br />When employee gives Direct service to the customer<br />When company needs info on what the customer wants<br />
  76. 76. Sources of Performance Information5. Customers<br /> PROBLEM<br />Expense<br />Printing<br />Postage<br />Telephone<br />labor<br />
  77. 77. Sources of Performance Information<br />360o Degree Appraisal<br />Multiple rater (boss, peers, subordinates, customers)<br />
  78. 78. 74<br />Rater Errors in Performance Measurement<br />What are the types of Rating Errors?<br />Preventive Measures?<br />What is Appraisal Politics?<br />
  79. 79. 1. SIMILAR to ME !<br />-” I am effective, so if you are like me? You must be too” <br />What are the types of Rating Errors?<br />
  80. 80. What are the types of Rating Errors?<br />2. CONTRAST Error<br />when we compare individuals with one<br /><ul><li>another instead of an objective standard</li></li></ul><li>What are the types of Rating Errors?<br />3. Distributional Errors<br />-are the result of a rater’s tendency to use only one part of the rating scale<br /> -Leniency<br /> -Strictness<br /> -Central Tendency<br />
  81. 81. What are the types of Rating Errors?<br />HALO and HORNS<br />- these errors refer to a failure to distinguish among different aspects of performance<br />- either all positive or all negative ratings<br />- cant make the necessary distinctions between strong and weak performance<br />
  82. 82. PREVENTIVE MEASURES<br />Rater Error Training<br />-make managers aware of rating errors and how to minimize it.<br />Rater Accuracy Training- frame of reference training<br />-emphasizes the multidimensional nature of performance<br />-familiarizes raters with various performance dimensions.<br />
  83. 83. APPRAISAL POLITICS<br />APPRAISAL POLITICS<br /> - refers to evaluators purposefully distorting a rating to achieve personal or company goals. <br />
  84. 84. APPRAISAL POLITICS<br />Appraisal Politics occur because;<br />- raters are accountable to the employee being rated.<br /> - there are competing rating goals.<br /> - a direct link between bet performance appraisal and desirable awards.<br /> - top executives tolerate “distortion”<br /> - “distortion” is part of company folklore<br />
  85. 85. PERFORMANCE FEEDBACK<br />
  86. 86. PERFORMANCE FEEDBACK<br />Recommendations;<br />- Feedback Frequently > 1/year<br />- Create the Right Context for Discussion<br />- Ask the Employee to Rate Himself First<br />- Encourage the Subordinate to Participate in the Session<br />Recognize Effective Performance through Praise<br />
  87. 87. PERFORMANCE FEEDBACK<br />Recommendations<br />-Focus on Solving Problems.<br />- Focus Feedback on Behaviour or Results, Not on the Person.<br />- Minimize Criticisms<br />- Agree to Specific Goals and Set a Date to Review Progress<br />
  88. 88. How to Identify the cause of a Performance Problem?<br />I<br />N<br />P<br />U<br />T<br />
  89. 89. How to Identify the cause of a Performance Problem?<br />E<br />M<br />P<br />L<br />O<br />Y<br />E<br />E<br />
  90. 90. How to Identify the cause of a Performance Problem?<br />F<br />E<br />E<br />D<br />B<br />A<br />C<br />K<br />
  91. 91. How to Identify the cause of a Performance Problem?<br />P<br />E<br />R<br />F<br />O<br />R<br />M<br />A<br />N<br />C<br />E<br />
  92. 92. How to Identify the cause of a Performance Problem?<br />C<br />O<br />N<br />S<br />E<br />Q<br />U<br />E<br />N<br />C<br />E<br />S<br />
  93. 93. WAYS TO MANAGE EMPLOYEES PERFORMANCE<br />Ability<br />HIGH<br />MOTIVATION<br />
  94. 94. Don RebsAndalRicky AranzamendezTong Untalan Ding Villarin<br />
  95. 95. OBJECTIVES<br />Identify major determinants of individual performance<br />Discuss the three general purposes of performance management<br />Identify the five criteria for effective performance management system<br />Discuss the four approaches to performance management, specific techniques used in each approach, & the way these approaches compare with criteria for effective performance management system<br />
  96. 96. OBJECTIVES<br />Choose the most effective approach to performance measurement for a given situation<br />Discuss the advantages & disadvantages of the different sources of performance information<br />Choose the most effective source/s for performance information for any situation<br />Distinguish types of errors & explain how to minimize each in a performance evaluation<br />Identify the cause of a performance problem<br />
  97. 97. 18 September 2010<br />Ateneo de Manila University <br />Graduate School of Business<br />MBAH Batch 8<br />PERFORMANCE MANAGEMENT<br />andal<br />aranzamendez<br />untalan<br />villarin<br />

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